Every merger or acquisition goes through a learning process of its own. If managed properly, mergers and acquisitions (M&A) can help the organisation take a path of growth and prosperity. In this section, we describe mergers and acquisitions, in brief.Mergers and acquisitions reached new heights in the 1990s that eclipses the peaks set in the 1980s. This period witnessed the development of the most unusual merger wave in the US economic history. Large scale mega mergers became common place. Hostile deals captured media headlines on a regular basis. This wave collapsed in 1980s and many of the highly leveraged deals of that period became fashionable in the early 1980s. However, just when it appeared that the frantic pace of mergers had clearly ended, the trend got reversed and a new period of M&A began in 1993. These periods are characterised by cyclic activity, that is, high levels of merger followed by a period of relatively few mergers.Mergers are often categorised as horizontal, vertical and conglomerate mergers.
A horizontal merger occurs when two competitors combine. The Hewlett Packard and Compaq merger is an example of horizontal merger. If a horizontal merger causes the combined firm to experience an increase in market power that will have anti competitive effects, the merger may be opposed on anti trust grounds. In recent years, however, governments all over the world have been liberal in allowing many horizontal mergers to take place unopposed.
A vertical merger is a combination of companies that have a buyer-seller relationship. Merck, the world’s largest drug company acquired Medco, the largest marketer of discount prescription medicines in the U.S. This is an example of vertical merger. This transaction enabled Merck to be not only the largest pharmaceutical company but also the largest integrated producer and distributor of pharmaceuticals. This transaction too was not opposed by anti trust regulators even though the combination clearly resulted in a more powerful firm. Recent acquisition of Corus by the Indian corporate Tata is also an example of this type.A conglomerate merger occurs when the companies are not competitors and do not have a buyer-seller relationship. For instance, Phillip Morris, a tobacco company acquired general foods and these companies were in very different lines of business.
A horizontal merger occurs when two competitors combine. The Hewlett Packard and Compaq merger is an example of horizontal merger. If a horizontal merger causes the combined firm to experience an increase in market power that will have anti competitive effects, the merger may be opposed on anti trust grounds. In recent years, however, governments all over the world have been liberal in allowing many horizontal mergers to take place unopposed.
A vertical merger is a combination of companies that have a buyer-seller relationship. Merck, the world’s largest drug company acquired Medco, the largest marketer of discount prescription medicines in the U.S. This is an example of vertical merger. This transaction enabled Merck to be not only the largest pharmaceutical company but also the largest integrated producer and distributor of pharmaceuticals. This transaction too was not opposed by anti trust regulators even though the combination clearly resulted in a more powerful firm. Recent acquisition of Corus by the Indian corporate Tata is also an example of this type.A conglomerate merger occurs when the companies are not competitors and do not have a buyer-seller relationship. For instance, Phillip Morris, a tobacco company acquired general foods and these companies were in very different lines of business.
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